The effective governance of charities has rightly received a lot of attention over the last 25 years. While there is no overriding one size fits all solution to the best structure, consensus has formed around areas of best practice as evidenced by the Good Governance Code.

Because of the sheer volume of issues requiring trustees' attention, many charities delegate responsibilities in certain areas to committees which in turn report back to the main board. One of the key areas is finance, and in particular investment. For a lot of charities investment sits within the remit of the finance and general purposes committee (or other similar title) but a number, particularly ones receiving significant parts of their income from returns on their endowment or other assets, have a separate investment committee.

While trustees can make investment decisions themselves, many choose to delegate to external managers and/or advisers, or in the much larger charities internal professionals. But trustees still need to monitor performance and be involved with setting investment strategy and to do this they will need to find a way of accessing expertise within their number.

So how can charities ensure their arrangements are working effectively? How do they achieve the right blend of investment experience on their board and/or relevant sub-committees? Is finding appropriate people becoming a greater challenge?

Charity Commission's CC14 guidance on investing charitable funds says: "Trustees must use their skills and knowledge in a way that is reasonable in the circumstances ('the duty of care'). For example, a trustee with investment experience should draw on his or her skills and knowledge of investments when making decisions and consider how suitable any investment is for theircharity."

Each charity will have different arrangements for making investment decisions and these will depend on the internal resources and expertise available to it, and the relative importance of its investments in terms of its ability to achieve its aims.

But whatever arrangements are put in place, the trustees should be able to demonstrate that they have retained overall control of decision-making and have complied with their duties.

The Good Governance Code states that trustees should ensure: "Delegation to committees, staff and volunteers (as applicable) works effectively and the use of delegated authority is properly supervised."

If trustees can demonstrate that they have considered the relevant issues, taken advice where appropriate and reached a reasonable decision, they are unlikely to be criticised for their decisions, or for adopting a particular policy.

Although trustees do not need to have specialist investment knowledge themselves, charities that have invested, or want to invest, significant funds will find it helpful to have a trustee with specialist knowledge of investments on its board or committee with responsibility for investment. Some charities establish internal investment committees to advise the trustee board on the more detailed aspects of its investment policy, for example, asset allocation.

A separate committee gives charities the option of having committee members with investment acumen who aren't necessarily part of the main board, thus adding a level of both expertise and independence, perhaps in the role of the chair for example. This might be particularly useful for charities whose constitution allows them to only have members on their main board meaning they are therefore potentially more restricted in the pool of investment expertise they can access.

There is also an argument that having at least one lay member, someone without any investment know-how on the committee may be useful so they can challenge any assumed knowledge and bring a different perspective.

Trustees should be clear about the remit of any sub-committees, and have clear terms of reference that are constantly reviewed. These should contain details of what committees can make decisions about, what financial and other limits there are on their decision-making and how and how often these decisions are reported to the trustees. They should also consider thatwhile investment decision-making may have been delegated to a committee, all trustees bear responsibility ultimately and having some level of basic knowledge of investments on the trustee board as a whole might help trustees understand what is reported back to it and assess that the committee is doing its job properly. A number of fund management firms and other providers runtrustee training courses on the basic principles of investment.

Other things that committees need to consider are how many times a year they meet. While there is no one ideal number, to effectively continually monitor the performance of investments, having at least quarterly meetings is often considered appropriate. However, demands on people's time need to be taken into account, particularly if committee members are also full trustees and/or sit on other committees.

Indeed time pressure is often the biggest barrier to charities finding the investment expertise they need be it on a committee or on the full board and identifying people to offer their skills is a perennial problem, especially for smaller, less well-known charities outside of the south east. Whether having the ability to pay people for their time would increase both effectiveness andaccess to expertise is an ongoing debate with consensus generally that it would not. Ultimately there is no easy solution to finding the right people to help a charity, so as in any area when competing for volunteers charities need to work hard to source the right people, perhaps even considering advertising for credible candidates.

Whatever arrangements a charity has to manage its investments it is important to constantly review their effectiveness and be prepared to change them if necessary. Doing something because it is what has always been done is not good enough. Having the right arrangements, be that through an investment committee or not, so that trustees can fulfil both their duty of careand maximise return on investments to allow them to meet their charitable objectives, is vital especially in the current climate,This article is provided by CAF, sponsor of the finance hub. If you are interested in finding out more about investments, visit the CAF Investment Knowledge Centre, created by Octopus Investments, an online resource intended to complement advice received from expert investment advisers, not to replace it. The centre should help to give you a basic understanding and insight into the world of investments.